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If you invest $125 in a stock, borrowing 80 percent of the $125 at 20 percent interest, and the stock price rises by 40 percent, what is the return on your investment? ________ percent

Answer :

Having invested $125 in a stock, borrowing part of that investment and paying interest on it, plus the investment went up 40%, the return on investment is 24 percent.


To calculate this, we first need to determine the amount borrowed and the interest paid on that borrowed amount. 80 percent of $125 is $100, so this is the amount borrowed. The interest on this borrowed amount is 20 percent of $100, or $20.

Next, we need to determine the increase in the stock price. 40 percent of $125 is $50, so the stock price has increased by $50.

Finally, we need to calculate the return on the investment. The return is the increase in the stock price minus the interest paid on the borrowed amount. This is $50 - $20, or $30.

To find the return as a percent, we divide the return by the original investment and multiply by 100. This is ($30 / $125) * 100, or 24 percent.

Therefore, the return on your investment is 24 percent.

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